SINGAPORE: Oil pared gains on Tuesday as the dollar strengthened, with the market s attention turning to forecasts for steady US crude inventories after prices topped $75 earlier on optimism about the economy.
The US dollar rose after Australia s central bank surprised markets by leaving its interest rates unchanged, sending the Australian dollar down.
March US crude was up 11 cents at $74.54 by 0747 GMT, after touching $75.44 earlier, a rebound of more than $3 from last week s 2010 lows. London ICE Brent rose 6 cents to $73.17.
The big gains were linked to expectations of recovery, but people are reassessing oil market fundamentals, looking to the next inventory report to derive some guidance, said David Moore, a commodity strategist with the Commonwealth Bank of Australia.
We have a situation where demand in the US still seems quite subdued. We have seen a fairly marginal movement in the dollar that might be having a negative impact on the oil price, Moore said.
US crude stockpiles probably slipped by 200,000 barrels in the week ended Jan. 29 following disruptions at a Texas port, while inventories of distillates, including heating oil and diesel, may have declined by 900,000 barrels, a Reuters preliminary survey showed.
But gasoline stocks likely posted a larger gain of 1.3 million barrels, the poll showed.
Industry group American Petroleum Institute s inventory report will be released at 2130 GMT on Tuesday, followed by government statistics from the US Energy Information Administration on Wednesday at 1530 GMT.
Demand for oil isn t really improving, said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd. We don t see any sign of real recovery. There is a huge amount of inventories in the physical markets.
US crude for March delivery reached its highest intraday price since Jan. 22 earlier after prices touched $75, triggering automatic buy orders.
People are quite nervous around $75, Emori said. There was short-covering after prices broke above that level. In the very short term, the market has been oversold, so some people see it as a good time to buy on dips below the $75-$80 range.
An industry report showed on Monday that the US manufacturing sector grew in January at a faster rate than expected, in a sixth straight month of expansion.
The Institute for Supply Management (ISM) index rose to its highest since August 2004, a sign the world s top economy is recovering from the deepest recession in decades, which could boost oil demand.
Ship traffic was back to normal operations along the Sabine-Neches Waterway on Sunday after a tanker collision and oil spill on Jan. 23 shut the channel that supplies crude oil to four US refineries.